> Warren Buffett Blog: Warren Buffett buys into Seritage Growth Properties

Monday, December 21, 2015

Warren Buffett buys into Seritage Growth Properties

Warren Buffett just bought 2 million shares of a company called Seritage Growth Properties (SRG). That works out to an 8% stake and makes him Seritage's second-largest shareholder.

Shares of Seritage surged 17% on the news. Seritage is a real estate investment company that was spun off by struggling retailer Sears (SHLD) earlier this year.

Seritage owns 262 retail locations. Most of them are Sears or Kmart stores. (Sears also owns Kmart.) Seritage then leases the properties back to the Sears and Kmart stores.

The company has a joint venture with shopping mall owners Simon Property Group (SPG), General Growth Properties (GGP) and Macerich (MAC) as well. 

Legally, Seritage is set up as a real estate investment trust, which means it by law has to pay at least 90% of its taxable earnings back to shareholders. The company said last month when it reported earnings that it expected to declare a dividend by the end of the year.

Berkshire Hathaway famously does not pay a dividend.

But it's no secret that Buffett likes receiving them from his many investments. Berkshire Hathaway has often bought preferred stakes in companies -- investments that usually pay higher dividends to their investors than the common stock. 

Buffett may also be making a bet on the U.S. consumer -- although not necessarily Sears and Kmart shoppers. Seritage said last month that 22% of its revenue came from third-party tenants -- i.e. not Sears or Kmart.

That group includes Walmart (WMT), Dick's Sporting Goods (DKS), Nordstrom Rack (JWN) and Lands' End.